Oregon Adventures purchased equipment for $80,000. The company sold the equipment three years later for $45,000. The expected service life of the equipment was seven years and its residual value was estimated to be $10,000. Oregon uses straight-line depreciation. Which of the following will be included in the journal entry used to record the sale of the equipment? Multiple Choice Credit Gain $5,000 Debit Loss $5,000 Credit Accumulated Depreciation $40,000 Credit Equipment $5,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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